1. Collaborative Action on Climate Risk
Supply Chain Report 2013–14
Report written for
CDP by:
CDP
info@cdp.net
+44 (0) 20 7970 5660
www.cdp.net

2. CDP Supply Chain Member Companies
Lead Members
Bank of America
{ Inc.
Dell
FIBRIA Celulose S/A
Goldman Sachs Group Inc.
Juniper Networks
{
L’Oréal
Microsoft Corporation
PepsiCo
{
Pfizer Inc.
PricewaterhouseCoopers LLP
Suzano Pulp and Paper S.A.
The Coca-Cola Company
Vale
Walmart
{ Founding CDP supply
chain water members
Corporate Members
Abbott Laboratories
Accenture
Acer Inc.
Amdocs Ltd.
AT&T Inc.
Autodesk Inc.
Banco Bradesco S/A
Braskem S/A
Bristol-Myers Squibb
British American Tobacco
British Sky Broadcasting
BT Group
Cisco Systems, Inc.
Colgate Palmolive Company
CSX Corporation
Diageo Plc.
Domtar Corporation
Eaton Corporation
Eletropaulo Metropolitana
Eletricidade de São Paulo S/A
Elopak
Endesa
Eni SpA
Fiat
Ford Motor Company
Gas Natural SDG S.A.
Contents
3 Executive Summary
5 The Accenture Perspective
6 About the CDP’s Supply Chain report
8 Introduction
14 Rethinking Supply Chain Resilience
21 CDP Action Exchange
27 The Need for a Wider View of Supply Chain Sustainability
29 The Importance of Engaging in the Policy Process
30 Conclusion
31 Supplier Climate Performance Leadership Index
2
General Motors Company
Groupe Steria
Hess Corporation
IMI
Imperial Tobacco Group
Jaguar Land Rover Ltd
Johnson & Johnson
Johnson Controls
JT International SA
KAO Corporation
KPMG UK
Marfrig Alimentos
MetLife, Inc.
National Grid
Nestlé
Nokia Solutions and Networks
Rexam
Royal Philips
S.C. Johnson & Son, Inc.
SABMiller
Starwood Hotels & Resorts
Worldwide, Inc
Swisscom
Taisei Corporation
{
Unilever
Vodafone Group

3. Executive Summary
This year’s sixth annual CDP supply chain information request generated
its largest response yet: with 2,868 companies, supplying 64 supply chain
program member companies, disclosing their carbon emissions and approach
to climate risk management. They provided a wealth of data on how suppliers
and their customers are collaborating to drive down carbon emissions,
mitigating water risk, seizing opportunities, and building revenue and brand
along the way.
Suppliers report that both climate risk and opportunity are at high levels: 72%
identify a current or future risk related to climate change; 56% of companies
identifying climate change related opportunities say that consumers are
becoming more receptive to low-carbon products and services.
Suppliers realized savings of US$11.5
billion from emissions reduction
investments this year, down from
US$13.7 billion in 2012
some leading companies are beginning to reposition
themselves in this way. Meanwhile, substantial
emissions reductions and monetary savings are to be
found in existing supply chains.
Analysis based on CDP’s supply chain program data
has, for the first time, identified where emissions are
generated within supply chains, and which sections of
those supply chains are most likely to provide a return
on investments in terms of reducing emissions and
generating monetary savings.
Companies must complement such top-down analysis
with a bottom-up assessment of the emissions
throughout the lifecycle of key products and services.
But regulatory uncertainty is making companies cautious
about investing in emissions reductions and supply chain
sustainability. Seven of the ten sectors report investment
falling from 2012 or 2011 levels, or from both. They
are also increasingly focusing on investments with
shorter payback periods, which tend to deliver only
incremental benefits.
And while the leadership of the 64 member companies
continues to improve, they are leaving their suppliers
behind. For example, 34% of members have set both
absolute and intensity-based emissions reductions
targets, up from 33% in 2012. For suppliers, the figure is
7%, up from 5% in 2012.
Suppliers realized savings of US$11.5 billion from
emissions reduction investments this year, down from
US$13.7 billion in 2012.
Against this worrying backdrop, this year’s report drills
down into the CDP supply chain data to examine how
companies should best prioritize their investments and
work with their supply chains to reduce climate risks and
seize the opportunities presented.
Companies must assess the scope of the
climate challenge
Fundamentally, companies need to place climate change
and sustainability at the heart of their strategy. Indeed,
Once those risks are identified, their management is
crucial. 78% of supply chain program participants that
identify regulatory, physical and other classes of climate
risk and report a risk management approach integrate
the issue into their company-wide, multi-disciplinary risk
management processes. Worryingly, 38% of suppliers
reported no documented processes for assessing and
managing climate-related risks.
Collaboration along the supply chain is crucial
Collaboration is at the very heart of supply chain
sustainability – and it yields results. In 2013, suppliers
reported 427 member-prompted organizational-level
emissions reductions initiatives, leading to the reduction
of the equivalent of 2.3 million metric tonnes of carbon
dioxide (CO2e). However, there is enormous scope
for more collaboration: program participants identified
2,186 customer-supplier collaborative opportunities that
have not yet been implemented.
Collaboration can work. Those companies that engage
with two or more suppliers, consumers or other partners
are more than twice as likely to see a financial return
from their emissions reductions investments, and almost
twice as likely to reduce emissions than those who don’t
engage with their value chain.
3

4. To encourage closer collaboration between members
and suppliers, CDP has launched its Action Exchange
initiative. Six supply chain member companies will
work with suppliers, academic researchers and leading
service providers to identify – and hopefully implement –
the most attractive emissions reductions opportunities.
Companies must take a wider view of supply
chain sustainability
Carbon and climate risks are linked to other
sustainability issues, such as water and resource
scarcity. Companies can use these as levers to bear
down on carbon emissions.
Staff, suppliers and customers must be more
effectively motivated
Companies also need to ensure they have the
internal capacity to identify climate change risks and
opportunities, and they need to better motivate their
employees to deliver on their objectives.
Investing in resource efficiency: nearly half (302) of the
676 climate change mitigation projects reported in 2013
are in renewable energy, providing climate and energy
security benefits. Companies should look to reduce
commodity inputs across the board to deliver carbon
and cost reduction.
They need to get governance right, by integrating
climate change into business strategy. They need to
engage employees, invest in employee engagement
and incentive programs. They need to support
suppliers to help address the growing gap between
member company and supplier emissions reduction
performance. And they need to communicate progress:
communication is correlated with performance.
The water-energy-carbon nexus: CDP extended
its water program to supply chain participants,
revealing high levels of awareness of water risks,
but also lagging preparedness. Leading companies
are beginning to recognize that the true value of water
resides in business continuity, license to operate and
brand value.
And engage in the policy process
Given the lack of regulatory progress, companies should
consider engaging more with policymakers and those
that do deliver better emissions reduction performance
and potentially higher financial returns from emissions
reductions efforts. Those companies that engage
are almost three times more likely to report monetary
savings from their reduction projects than those that
do not.
4

5. The Accenture Perspective
Over the last three years, CDP and Accenture have worked closely together
to analyze the emissions performance of thousands of companies who
participate in CDP’s supply chain program. Over that time, we’ve seen
enormous progress, and groundbreaking initiatives and collaborations
emerge. But, as this year’s report shows, much more needs to be done.
Take scope 3 emissions. Measurements and reporting
here is often a leading indicator of supply chain action.
But of the 2,868 companies responding to the supplier
information request in 2013, only 36% report scope
3 emissions and, more worryingly, only about 11%
set either absolute or intensity scope 3 targets. More
broadly, we’ve seen investment in emissions reductions
level off, in the face of regulatory uncertainty and tough
economic conditions.
But the dynamics within supply chains are changing
rapidly. New technologies, pressure on resources and
new operational models promise to help transform
supply chain sustainability.
Next-generation digital technologies, for example, can
be applied to help deliver emissions reductions across
extended supply chains. Sensors and mobile devices
can help revolutionize the flow of information within
companies and throughout supply chains, possibly
leading to efficiencies and energy, cost and carbon
reductions. For example, Accenture’s joint research in
2009 with Vodafone identified 13 specific opportunities
supported by mobile services that, by 2020, could save
2.4% of expected EU emissions – or 113 million tonnes
of CO2e.
Meanwhile, pressure on resources will accelerate
progress towards the adoption of circular economy
principles. As energy becomes more expensive, and
other natural resources scarcer, companies may
increasingly embrace principles of reuse, recycle,
remanufacture, refurbish and repair. Adoption of circular
economy principles could potentially create over US$2
trillion of value in material savings and save millions of
tonnes of CO2 emissions in the process.
The circular economy depends upon collaboration with
suppliers and customers – and will see the extension
into sustainability of the ‘shared services’ approach,
that has already been adopted in other aspects
of supply chain operations. Sharing talent and
infrastructure has been shown to help drive cost
efficiency; it will be employed to drive resource efficiency
and emissions reductions.
In essence, Accenture envisions a ‘Control Tower’
approach to supply chain sustainability, combining
three key capabilities: Visibility, Analytics and Execution.
Enhanced visibility will be enabled by the digital
technology revolution. Analytical advances will turn
this flood of supply chain data into information, to
help prioritize emissions reductions activities, identify
performance gaps and drive targeted actions. Finally,
execution will be facilitated by collaboration, involving
more corporate functions as well as engaging suppliers
and customers.
Without doubt, the challenges in
driving supply chain sustainability
are undiminished – if anything,
they are proving more intractable
than ever. But the tools and
thinking are emerging to help drive
transformational outcomes in
terms of reducing environmental
impacts, and creating sustainable
business value.
5

6. About CDP’s Supply Chain Report
CDP’s supply chain program aims to drive action on
climate change among both purchasing companies
and their suppliers. The program provides a platform
for some of the world’s leading companies to collect
business-critical climate change information from their
suppliers. The program currently has 64 members, the
majority of whom are located in Europe (28) and North
America (26). In 2013, CDP collaborated with these
members to request information on greenhouse gas
(GHG) emissions from over 5,600 of their collective
suppliers. 2,868 global suppliers cooperated with this
information request, a 51% response rate. This response
rate is better than in past years (39% in 2012), providing
a more comprehensive picture of supply chain emissions
(see figure A).
Similar to last year, performance scores continue to
trail disclosure scores overall. This is consistent with
the broader trend that reporting on corporate climate
strategy and mitigation initiatives is outpacing actual
performance. Asian and European suppliers earned the
best disclosure scores, while the highest percentage
of A/A- performance bands were awarded to suppliers
in the same regions (see figure E). From a sector
perspective, Financials and Utilities scored the highest
percentage of A/A- performance band, as other sectors
lagged behind (see figure D).
Scoring Methodology: All responses to the 2013
supplier information request were scored on two
factors: 1) transparency, in the form of a numeric
disclosure score and 2) action on climate change,
in the form of a letter grade performance band. In
2010, in recognition of a promising trend in improved
transparency among large public companies, CDP
introduced a performance component to its scoring
system to recognize companies that are taking action on
climate change. In 2011, the same performance scoring
was introduced to CDP’s supply chain program and all
suppliers with a sufficiently high disclosure score (≥50)
also received a performance band. Disclosure scores
under 50 do not necessarily indicate poor performance;
rather, they indicate insufficient information to evaluate
performance. FirstCarbon Solutions, CDP’s supply chain
scoring partner, performed the scoring evaluations of
the suppliers who were not already scored by CDP’s
investor-led climate change program – a majority of the
2,804 who responded to the request (see pages 31-33).
CDP also worked with Accenture to survey CDP’s
64 supply chain member companies on their own
sustainable supply chain strategies. Select members
were interviewed to draw additional qualitative insights.
A team of experts from CDP and Accenture analyzed
responses to the survey and conducted supporting
outside research to gather insights and anecdotes for
this report.
The positive impact of association with CDP members
is more evident this year. Suppliers who received two or
more information requests from their corporate clients
were far more likely to disclose. Only 44% of suppliers
who received a single request responded, while close to
75% of suppliers with more than one customer request
responded (see figure C).
A. Response rate over the years
2009
715
2010
98 589
1000
2011
59
1864
2012
Year
95
2415
2013
2868
140
18% increase in number of responses
{
Answered questionnaire
{
Declined to participate
{
No response
Number of suppliers contacted
by member companies
B. Number of supplier requests by each member
6
More than 200
11
150-200
9
100-150
9
75-100
7
50-75
8
25-50
11
Less than 25
9
{
Number of member companies contacting suppliers
51%
1853
54%
4234
44%
2012
2651
1402
2011
3627
Response
rate
2010
2275
173
Number of
suppliers
contacted
2009
794
6215
39%
2013
5659
51%

7. C. Response rate based on number of customer requests received
N=4626
N=539
N=208
18%
23%
6%
2%
5%
4%
54%
N=286
2%
92%
77%
73%
44%
One
{
Two
Three
Answered Questionnaire
Four or more
Declined to Participate
{
No Response
{
D. Performance band by sector
Avg P Band
Financials
Information Technology
Telecommunication Services
Utilities
Health Care
Consumer Staples
21%
36%
12%
12%
28%
26%
26%
10%
22%
17%
7%
18%
16%
Consumer Discretionary 6%
25%
32%
25%
21%
Energy
20%
22%
28%
27%
18%
28%
35%
20%
35%
{
A/A-
{
B
{
C
12%
{
10%
16%
34%
23%
Materials 4%
12%
32%
23%
15%
Industrials 6%
10%
23%
25%
3%
13%
35%
45%
9%
12%
27%
D
{
18%
N
B
33
C
209
C
42
B
31
C
56
C
207
C
217
C
341
C
202
C
17
E
E. Performance band by region
Avg P Band
Asia
10%
Europe
10%
24%
26%
Latin America 2% 11%
North America 5%
ROW*
25%
24%
17%
21%
9%
30%
33%
{
A/A-
{
C
493
{
C
{
D
20%
25%
B
204
40%
24%
15%
C
12%
28%
30%
N
13%
28%
D
18%
{
64
C
561
C
33
E
*ROW means rest of world, including African, Caribbean & Oceanic countries
F. Disclosure scores by region (min, max, 25-75th percentile and average)
100
90
80
70
60
50
49
54
40
39
46
47
North America
ROW*
30
20
10
0
Asia
(N=423)
Europe
(N=843)
Latin America
(N=188)
(N=1259)
*ROW means rest of world, including African, Caribbean & Oceanic countries
(N=75)
7

8. Introduction
No one weather event can be directly blamed on climate
change. But the science is clear - extreme weather
events, exacerbated by rising sea levels, will become
more destructive as the world warms. The latest report
from the Intergovernmental Panel on Climate Change
(IPCC) says it is now 95% certain that emissions are
heating up the atmosphere and the oceans, and warns
of the need for “substantial and sustained reductions of
greenhouse gas emissions”.1
However, while the science seems clear, our politics is
not. Governments around the world are – by and large
– failing to put in place all of the policies needed to help
slow and possibly reverse rising carbon emissions. And,
in some parts of the world at least, the policy signals are
pointing in precisely the wrong direction. This is despite
clear calls from CEOs for public policy to be aligned
with sustainability goals, as depicted by the UN Global
Compact-Accenture CEO Study on Sustainability
2013, the largest survey to date of CEO attitudes
about sustainability.2
The corporate world is in a bind. Company executives
understand the issues rather than the science. They are
already seeing the effects of climate change on their
operations and on their supply chains. They are seeing
consumer preferences begin to change. They anticipate
regulatory action to cut emissions.
And, crucially, they recognize that opportunities exist
to leverage their supply chain to reduce emissions and
climate risk, and drive business value. CDP supply
chain member companies represent US$1.15 trillion of
purchasing power. The Scope 1 emissions captured by
the program account for 14 percent of 2013’s global
industrial emissions.3 If member companies can help
drive better emissions performance within their tier 1
suppliers, they can make a material impact on climate
change mitigation.
But, at present, the highly uncertain policy environment
in which they operate is holding them back.
8
Companies see increasing regulatory
uncertainty on climate change
These challenges are reflected in the participation in
the CDP’s supply chain program. In 2013, a record
number of companies were involved: 2,868 companies,
supplying 64 supply chain program member companies
(listed on page 2) disclosed information about their
emissions and approaches to identifying and managing
climate change issues. Of these, fully 72% identify a
current or future risk related to climate change that
has the potential to significantly affect its business
or revenues.
Of those who identify climate change related risks,
90% cite regulatory risk. This is a clear indication of the
current uncertain direction of regulatory travel. Certainly,
the regulatory environment is tightening in some parts
of the world. In the US, for example, the Environmental
Protection Agency is working on emissions controls for
coal-fired power plants. In China, pilot carbon emission
trading schemes will dovetail with a range of regulations
designed to improve energy efficiency and reduce
pollution. But in September, a new government won
elections in Australia promising to scrap carbon pricing
legislation. In November, Japan reversed its pledge
to cut emissions. And in Europe, leadership on
climate policy seems to be losing out to concerns
over competitiveness.
Regulatory uncertainty is affecting investments
by companies. E.I. du Pont de Nemours and
Company says that “as it makes long term capital
and R&D investment decisions, the uncertainty
surrounding new regulations adds complexity to
those business decisions”.4
There are two conclusions that can be drawn from this
policy slowdown. One is that governments are unlikely to
put pressure on companies in the short term to reduce
emissions. The other, much more credible conclusion
is that a gulf is growing between the increasingly urgent
calls from climate science and the regulatory response.
And, ultimately, bridging that gulf is likely to require more
rapid, more stringent, and therefore more costly policy
measures than would otherwise be the case.
1. Companies identify changing consumer
behavior as the biggest opportunity from
climate change (Top 3 drivers of climate
change opportunity)
60
% of companies identifying
opportunity driver
The disconnect could not be more striking; as officials
from around the world were arriving in Warsaw in
November 2013 for the latest round of UN climate
talks, the most powerful typhoon ever to make
landfall smashed into the Philippines. Yet even as
the country struggled to cope with the death and
devastation wrought by Typhoon Haiyan, the climate
change negotiations remained mired in deadlock
and backsliding.
50
56%
40
N=1235
N value (number of companies identifying opportunity
drivers beyond physical & regulatory drivers ) is
specified above the bar chart
30
20
10
0
7%
Changing
consumer
behavior
Fluctuating
socioeconomic
conditions
5%
Increasing
humanitarian
demands
1. http://www.ipcc.ch/news_and_events/docs/ar5/press_release_ar5_
wgi_en.pdf
2. UN Global Compact-Accenture, “The UN Global Compact-Accenture
CEO Study on Sustainability2013”, available at http://www.unglobalcompact.org/resources/451
3. Climate Analysis Indicators Tool (CAIT 2.0) of World Resources Institute - http://cait2.wri.org/wri
4. Complete response available in their public response at www.cdp.net

9. Despite the regulatory headwinds, those companies
that do embrace the low-carbon agenda could be
pushing at an open door, in terms of the receptiveness
of their existing and potential customers. Participants
were asked to report which other opportunities – aside
from those presented by regulation or physical climate
changes – they expect climate change to present, and
over what time period they are likely to materialize. More
than half (56%) identified changing consumer behavior
(see figure 1).
Four member companies – Dell, L’Oréal, Pfizer and
Unilever – identified 429 suppliers for whom the request
would be relevant – and 229 responded, a 53%
response rate. Of these, 33% of companies report that
their operations are located in water-stressed regions
and 36% believe that they are exposed to water-related
risks with potential to generate substantive changes
to their business. 20% of companies report that their
supply chain is exposed to water-related risk, but few
are ready to engage on this issue.
And these opportunities are already presenting
themselves: fully 85% say consumer behavior is already
changing, or will do so within the next one to
five years (see figure 2).
But the corporate response is plateauing…
Despite rising levels of regulatory risk, and apparently
receptive customers, the corporate response is
plateauing. In terms of reducing emissions, the picture
is marginally positive: in seven out of the ten industry
sectors, the percentage of participants reporting
reduced emissions rose in 2013 (although in only three
sectors did the percentage exceed one-third).
This is particularly noteworthy. If companies see their
consumers and corporate customers starting to
demand low-carbon products and services, it implies
that the uncertain regulatory environment may be a
lagging rather than a leading indicator of climate change
pressure on companies. Not only should companies
move rapidly to respond to changing consumer
attitudes, they should also be prepared for rapid
changes to the regulatory landscape.
The picture on emissions targets is mixed. The
percentage of companies expecting to achieve their
annual emissions target has risen from 28% in 2011 to
almost 34% in 2013. But the number of companies who
expect to miss their targets by target year end increased
from 35% in 2011 to 40%.
And for many companies, the threat from climate
change will manifest itself first by exacerbating water
risk: whether from water scarcity, resulting regulations
such as water pricing, or from flooding. For the first
time in 2013, CDP sent its water disclosure information
request to select suppliers of four pilot members in the
supply chain program.
But performance is often a lagging indicator. In terms
of investment made, the picture is worse: only three
sectors – utilities, financials and, barely, consumer
discretionary – show an upward trend in the percentage
that report investments in emissions reductions. In the
other seven sectors, the percentage was either lower
than 2012, lower than 2011 or, in the cases of IT and
2. Timeframe of impact for
various opportunity drivers
beyond physical & regulatory
opportunities
{
{
current
1-5 years
{
{
3. Percentage of respondents reporting investment in emissions
reductions across sectors
{
{
{
6-10 years
> 10 years
55%
49%
35%
N=663
N=71
N=55
43%
45%
44%
48%
34%
29%
39%
48
37
47
45
56
55
Financials
25
29
33
Energy
41%
36%
21%
Changing
consumer
behavior
45
61
67
37
48
47
Telecommunication Information
Services
Technology
24%
42%
2%
35%
45%
Utilities
13%
41% 42%
36%
24%
27%
43%
2011
2012
2013
20%
11%
32%
36%
37%
30%
31% 31%
11%
Fluctuating
Increasing
socioeconomic humanitarian
conditions
demands
N values (number of instances of various opportunity drivers
identified) are specified above the bar chart
28%
42
67
Health Care
123
29%
277 359 434
Materials
28% 28% 29%
37
453 500
Consumer
Discretionary
26%
28%
234 457 476
Consumer Staples
N values (total no of companies responding to this question by sector in CDP survey) are specified inside the bar chart
27%
470 539 696
Industrials
9

10. industrials, lower than both (see figure 3). The picture is
similar if participants are grouped by geographical
region (see figure 4).
In total, participants report US$77 billion of investments
in 2013, up fractionally from 2012’s figure of US$76
billion. But given that the number of companies
reporting investments has risen from 678 to 883, the
average sum invested per reporting company has
dropped 22 percent since last year.
The reasons are not hard to find. While the global
economy is slowly recovering from financial crisis and
economic downturn, the outlook remains uncertain.
This is weighing on the regulatory picture. In the face
of economic challenges, governments are proving
reluctant to act in line with the increasingly urgent calls
from climate scientists. This, in turn, makes companies
cautious about investing.
…and companies are focusing on shortterm measures
In response, companies are hedging their bets. A clear
trend in the data is a growing preference for emissions
reductions initiatives with shorter payback periods (see
figure 5). The number of initiatives with a payback of
more than three years have risen from 758 in 2011 to
1051 in 2013 – but the number with short paybacks has
risen from 1552 to 3076 over the same period.
While a focus on near-term opportunities may be
understandable, companies need to be prepared to
4. Percentage of respondents reporting investment in emissions
reductions across geographies
take a longer-term view to achieve the quantum of
reductions that will be necessary.
And there is clearly enormous scope for emissions
reduction. CDP asked suppliers and members to
disclose emissions data broken down by specific
product or service. 352 companies reported this data,
across 763 products or services. Of these, emissions
reductions were reported by 61 companies for only 116
products or services – or 15% of the total. And, of these,
more than half reduced emissions by 10% or less –
suggesting substantial room for improvement.
The gap is widening between supply chain
members and their suppliers
Responses to the supply chain information request in
2012 demonstrated a growing gap in the performance
of members and their suppliers. This gap is proving
stubbornly persistent. In terms of emissions reporting,
all member companies now disclose scope 1 and 2
emissions, whereas among suppliers, that figure is stuck
around the two-thirds mark. There was a jump in 2013 in
member companies disclosing their scope 3 emissions,
from 67% to 92%. Among suppliers, that figure was just
42% (see figure 6).
In terms of target setting, 34% of members have set
both absolute and intensity-based emissions targets.
This figure is up marginally from 2012’s 33%. For
suppliers, the figure is 7%, again up slightly from 2012,
when it was 5%.
5. Preference for shorter payback investments
among members and suppliers
52% 52%
39% 41%
29% 28%
{
{
{
42%
36%
> 3 years
1-3 years
< 1 year
26%
2011
N=238
2012
2013
491 655 861
Europe
N=242
N=2969
N=322
32%
34%
33%
31%
33%
947 1261 1278
North America
N=2072
40%
30%
41%
209 239 437
Asia
40%
N=3805
25%
37%
40%
{
{
{
2011
2012
2013
24%
217 260 292
ROW*
N values (number of instances) are mentioned inside the bar chart
*Rest of the world including Latin America, Africa, Caribbean & Asia Pacific countries
10
18% 19%
20%
35%
Members Suppliers
26%
37%
Members Suppliers
N is the total number of instances of investments reported
28%
38%
Members Suppliers

11. Participants are also asked three questions on
‘performance’: Has the company made investments in
emissions reductions? Has it reduced emissions yearon-year? And have those investments yielded financial
benefits? Here, the gap also widened.
for reporting monetary savings from those investments
were 84% and 29% in 2013. And, in terms of reporting
overall emissions reductions, 58% of members reduced
emissions in 2013, compared with 31% of suppliers
(see figure 7).
This year, 84% of members reported making
investments in emissions reductions initiatives,
compared to just 29% of suppliers. The previous year’s
figures were 69% and 22% respectively. The figures
6. Percentage of companies reporting scope 1, 2 & 3 emissions among members and suppliers
Members (2011)
Members (2012)
Members (2013)
{
{
{
98%
100%
{
{
{
• Total Suppliers in 2011: 1864 (for Scope 1 & 2)
• Total Suppliers in 2011: 1251 (for Scope 3)
• Total Suppliers in 2012: 2415 (for Scope 1 & 2)
• Total Suppliers in 2012: 1772 (for Scope 3)
• Total Suppliers in 2013: 2868 (for Scope 1 & 2)
• Total Suppliers in 2013: 2194 (for Scope 3)
Suppliers (2011)
Suppliers (2012)
Suppliers (2013)
100%
98%
100%
100%
92%
67%
63%
67%
65%
62%
67%
64%
57%
42%
29%
Scope 1
Scope 2
29%
Scope 3
7. Climate change performance - Members vs Suppliers
{
{
Members
Suppliers
2011
{
{
{
2012
2011 N=49 (members), N=1815 (suppliers)
2012 N=52 (members), N=2363 (suppliers)
2013 N=64 (members). N=2804 (suppliers)
2013
2011
2012
2013
2011
2012
2013
84%
73%
69%
63%
58%
54%
43%
39%
29%
39%
31%
18%
Respondents reporting year-on-year decrease in
emissions
29%
27%
28%
29%
31%
22%
Respondents reporting investments in climate change
mitigation
Respondents reporting monetary savings from climate
change mitigation activities
11

12. On the positive side, the number of projects reported
{ the 2012 financial year, FedEx Corporation’s
In
by companies has grown dramatically: Suppliers
sustainability initiatives helped the logistics giant
reported 3,805 initiatives in 2013, compared with 2,072
realize more than 1 million metric tonnes of avoided
in 2011. Among supply chain members, the figure has
greenhouse gas emissions and more than US$320
risen to 322 from 236. This suggests that opportunities
million in estimated fuel and energy cost savings and
abound, and program participants are beginning to
materials recycling revenues.
grasp them.
{
Spanish infrastructure firm Ferrovial believes that failure
Companies are leaving value on the table…
to meet its carbon reduction targets risks a loss
One of the key messages from 2012’s analysis is
of business to the tune of €755 million, or 10% of
that, in addition to the environmental benefits of
its turnover, mainly in its low-carbon infrastructure
reducing emissions, there is significant value to
business line.
companies in reducing their emissions, and those of
their supply chain. These can deliver benefits in terms
Inevitably, lower investment leads to poorer
of increased revenues, improved brand, lower costs,
performance. In 2012, participants reported monetary
and reduced risks:
savings from emissions reductions investments of
US$13.7 billion. For 2013, the figure has fallen to
{
Italian automotive company Pirelli reports that 45% of
US$11.5 billion. Although the number of companies
its €6.3 billion revenue in 2012 came from its ‘green
reporting savings has increased from 698 to 929,
performance’ products, up from 36% in 2010.
average monetary savings has fallen 44% in the past
12 months. There is substantial value to be had by
{
Japanese electronics firm Ricoh’s commitment to
improving supply chain sustainability and, in many
environmental management was recognized with the
companies, this value is going unclaimed.
highest environmental rating from the Development
Bank of Japan (DBJ) – which provided not only a boost
…and are misdirecting investments
to its brand, but also enabled it to refinance a Y30
Of even more concern is that companies may be
billion loan from DBJ at a lower rate.
misdirecting the investments that they are making. Our
analysis found that investment spend is not necessarily
correlated with carbon emissions reductions, nor
monetary savings from emissions reductions.
12

13. Take, as an example, the Automobiles & Components
industry group. Here, just 1% of investment was
directed at behavioral change projects. But they
generated 19% of estimated CO2 savings, representing
10% of the industry group’s emissions. Transportationrelated projects accounted for 10% of investment, but
delivered just 2% of emissions reductions (see figure 8).
This analysis can also be applied at the company level
Figure 9 shows the emissions reductions projects
undertaken by a telecom company, with the size of
the bubble representing the investments made. This
company reported more than 30 emissions reductions
initiatives in various areas.
However, we can see that most projects have not
yielded considerable carbon or monetary savings.
The most successful project – fleet management
operations and maintenance in Spain – received a
tiny proportion of the company’s investments. By
better tracking the value that projects are generating,
companies can more effectively prioritize their emissions
reductions investments.
Exposures and opportunities
The headline findings from this year’s analysis, then,
are two-fold. First, the gulf is growing between climate
science on the one hand, and the political, regulatory
and corporate response on the other. This is building
up risk. And second, companies are leaving potential
emissions reductions and monetary savings on
the table, which presents opportunity and
competitive advantage.
The rest of this report will examine how companies
can rethink their internal objectives, processes
and governance, and how they can work with their
supply chain partners, to manage these risks
and help seize these opportunities.
8. Comparison of project investment allocation and benefits : Automobiles and Components
industry group
Automobiles & Components Industry Group
Type of emissions
reductions initiative
Estimated annual emissions
savings (metric tonnes CO2e)
Annual monetary savings (USD)
Investment required (USD)
Energy efficiency: Processes
25%
23%
24%
Behavioral change
19%
10%
1%
Energy efficiency: Building services
19%
27%
37%
Energy efficiency: Building fabric
15%
12%
6%
Low carbon energy installation
8%
11%
13%
Other
5%
7%
1%
Process emissions reductions
4%
6%
7%
Low carbon energy purchase
3%
2%
1%
Transportation: fleet
2%
2%
10%
Desirable {{{{{{
Not desirable
9. Comparison of project investment allocation and benefits : Major European Telecommunications
Service Provider
Fleet management (O&M)
Carbon emissions saved (metric tonnes CO2e)
3,200
2,800
2,400
2,000
1,600
Technical site low efficiency
equipment replacement
LED tubes deployment
Data center low efficiency
equipment replacement
1,200
Radio station rectifier
replacement
800
400
0
Process efficiency
Admin building energy efficiency
0
500,000 1,000,000 1,500,000 2,000,000
At individual project level — Major
European & Latin American
Telecommunications Service Provider
Monetary savings
(in US Dollars)
Size of the bubble represents total
investments in emission (in US Dollars)
reduction by companies in particular sector
13

14. Rethinking Supply Chain Resilience
Previous editions of CDP’s supply chain report have examined the
sustainability challenges posed by today’s globalized supply chains. CDP
set out the business case for addressing these challenges, explaining the
opportunities they present for revenue growth, cost savings and reduced risk.
This year, the report considers how companies and
{
ABB’s Growth Strategy 2011-2015 identifies mitigation
their suppliers can seize these opportunities – what
of climate change, renewable energy and energy
practical steps they can take to manage climate and
efficiency as key drivers and growth opportunities
other sustainability risks, while at the same time adding
for its business. About 55 percent of the Swiss
financial value. This work is all the more pressing, given
engineering corporation’s revenues are already
the slowdown seen in action and investment.
related to products and services in its energy efficiency
portfolio that help customers save energy and reduce
Whether companies are starting out on the journey, or
greenhouse gas emissions.
have taken their first steps towards addressing supply
chain sustainability, a three-stage process should be
{ fiscal 2012, revenue from Siemens AG’s continuing
In
followed. Companies should consider the following:
operations from its Environmental Portfolio amounted to
€33.2 billion, accounting for 43 percent of the German
{
Assess the scope of their climate and sustainability
engineering giant’s total sales.
exposures, and the opportunity set they present;
Without doubt, such fundamental repositionings
{
Collaborate with their supply chain partners to help
take time. They are an investment in the future. But,
reduce risk and exploit opportunities; and
for almost every company, there are also substantial
emissions reductions and monetary savings to be made
{
Motivate their own staff, and their suppliers, to ensure
in existing supply chains.
sustainability objectives are prioritized.
Allocating emissions across supply chains
Assessing the scope of the climate challenge
In the context of limited resources available for emissions
Before any organization can decide what path to take,
reductions, management needs to understand where its
it has to know where it needs to get. The first step
investments are likely to generate the best returns. To
for an organization that is serious about embedding
help with this process, the performance of supply chains
sustainability is to assess the big picture – and position
is measured in terms of their propensity to act to reduce
climate change firmly within its strategic vision. The data
emissions, and the degree to which they have realized
CDP’s supply chain program has collected can also help benefits when they have acted see the methodology
companies understand where they are now, and
- on next page. This information will allow managers
help them identify points in their supply chains where
to target their efforts and investments on those parts
scarce resources can best be deployed to improve
of their supply chain most likely to deliver emissions
sustainability performance.
reductions and financial benefits.
Placing sustainability within
the strategic vision
Corporate efforts to reduce emissions have, to
date, largely been focused on process efficiencies
and incremental improvements. But, ultimately,
global emissions will need to fall substantially if
we are to prevent dangerous climate change. The
Intergovernmental Panel on Climate Change has called
for industrialized countries to reduce emissions to 2540% below 1990 levels by 2040. Longer term, these
cuts must be much deeper. The EU, for example, has a
target to reduce emissions to 20% of 1990 levels by the
middle of this century – meaning that much economic
activity will need to be entirely decarbonized.
A handful of leading companies have begun to
reposition themselves strategically in anticipation
of this fundamental transition to a low-carbon world.
For example:
14
We carried out this emissions allocation analysis across
the 19 industry groups represented by the 64 members
of CDP’s supply chain program. Figure 10 (page 15)
– showing the Technology and Hardware Equipment
industry group – provides an illustrative example. The
X axis shows propensity to act; the Y axis business
benefits; while the magnitude of the bubble (the Z axis) is
the total supplier scope 1 and 2 emissions for the goods
and services supplied to that sector.

15. As can be seen from the figure, those bubbles were
then placed upon a chart divided into four quadrants:
The industry group is classified as At Risk (Industry
groups were classified as “At Risk” when large emitter
groups reporting to these members featured in the
Laggards quadrant). The largest part of its emissions
are accounted for by the Technology Hardware and
Equipment, Transportation, and Capital goods industry
groups. Virtually all of the reporting industry groups fall
in the laggard quadrant, with only Transportation and
Software Services reporting moderately better business
benefit realization.
{
Leaders: Companies in this quadrant showed a high
propensity to act, and reaped monetary benefits from
those emissions reductions made;
{
Materialists: These companies reaped benefits from
initiatives taken earlier, but have not shown propensity
to act in recent times. These companies need to be
motivated to act;
{
Contenders: Companies in this quadrant showed a high
propensity to act but are yet to realize benefits. These
companies need help in prioritizing their investments;
{
Laggards: Although they have taken the first step to
report to CDP, these companies need motivation to act
as well as guidance on prioritizing investments.
This type of analysis allows member companies to
quickly assess which industry groups account for the
largest parts of their supply chain emissions, and give an
indication of how likely investment and engagement is to
yield results. For example, industry groups which have a
low propensity to act, but which have delivered benefits
on those investments made, might be more promising
early targets for engagement than those sectors where
investments to date have yielded few benefits.
Given that members of this group tend to assemble
equipment sourced from suppliers, rather than
manufacture in-house, these findings are unsurprising.
The opportunity here lies with members working
with their suppliers on collaborative projects for
process emissions. Transportation also provides
opportunities, as the sector relies on large trailers
with high haulage capacity – this is a sub-sector that
often uses inefficient technology.
Carrying out this emissions allocation analysis speaks
to – and facilitates – the basic approach of CDP’s
supply chain program. It helps buyers identify emissions
hotspots, and provides the primary data to allow for
deep engagement with suppliers to drive reductions.
This shows the benefits of requesting emissions data
through the CDP program.
Here, we present an example – Technology and
Hardware Equipment industry group – to illustrate our
findings.* (see figure 10)
10. Supply chain hot-spots (for members of technology & hardware equipment industry group)
10 Materialists
Leaders
Diversified Financials
9
8
Consumer Durables & Apparel
Business Benefits
7
Transportation
6
Software & Services
Media
Consumer Services
5
Telecommunication Services
Capital Goods
4
Materials
Technology Hardware & Equipment
3
Retailing
Consumer Durables & Apparel
Commercial & Professional Services
2
Automobiles & Components
1
0
Laggards
0
Contenders
1
2
3
4
5
6
7
8
9
*The supply chain hot-spots for other GICS
industry groups are available online at:
https://www.cdp.net/SiteCollectionImages/
events/2014/Supply-chain/supply-chainhot-spot-anaylsis.png.
10
Propensity to act
Size of the bubble represents total scope 1 and scope 2 emissions of the suppliers in that industry
15

16. Determining supply chain hot-spots:
the methodology
This year, we used the huge volume of data
generated by CDP’s supply chain program to
identify the sustainability performance of 19
industry groups, in what we believe to be a
first-of-its-kind analysis.
2006 suppliers calculated and reported the volume
of their scope 1 and 2 emissions. We then related
those to the products and services supplied to
the 64 supply chain member companies involved
in the program.
Life cycle analysis
This top-down supply chain view, meanwhile, should
be complemented with a bottom-up assessment of the
emissions throughout the life cycle of key products and
services – breaking emissions down across material
acquisition, manufacturing, packaging, storage and
distribution, consumer use and, ultimately, recycling.
In figure 11, we show the results of the Coca-Cola
Enterprises’ product life cycle analysis of three of its
leading products, which clearly identifies packaging
as a supply chain emissions hot spot. In response, it
introduced a number of initiatives designed to reduce
the weight of its products by between 25 and 50%,
generating cost savings of US$180 million over two
years. Its ‘PlantBottle’ packaging – which is made
partially from plants – has avoided the emission of
100,000 tonnes of CO2 since 2009.
Per unit CO2e
emissions in Kilogram
0.25
This analysis created two values: ‘propensity to
act’, based upon whether the supplier had reported
realized emissions reductions and whether it had
realized monetary savings; and ‘business benefits’,
calculated by giving equal weighting to whether
they had made investments, undertaken emissions
reductions activities, set reduction targets, and
identified all three key climate risks (physical,
regulatory and other).
0.15
0
Material
Manufacturing
Packaging
Distribution
acquisition
{ Coca-Cola 300ml glass bottle
{
{ Coca-Cola 300ml can
Storage
Consumer
use
Coca-Cola 500ml plastic bottle
12. Product Life Cycle Analysis - Nokia Group
Per unit CO2e
emissions in
Kilogram
The next stage of the analysis was to calculate
whether those suppliers have made investments
in emissions reductions, and whether those
investments had generated emissions reductions
and monetary benefits.
This allows member companies to identify where
most of their scope 3 emissions can be found, and
also where investments might be most effective.
11. Product Life Cycle Analysis - Coca-Cola Enterprises
10
5
0
Material acquisition
{
16
We grouped those 64 members into 19 industry
groups. Then for each industry group, component
industry groups contributing to emissions in the
supply chain were identified. For each component
industry group, emissions from all suppliers in that
group were aggregated. This identifies which type of
supplier contribute most to those industry groups’
supply chain (or scope 3) emissions.
Manufacturing
Average mobile phone
Transportation
{
Consumer use
Nokia Asha 300 Nokia’s low
end device
{
Recycling
Nokia Lumia 800. Nokia’s high
end smart phone
Nokia Group, meanwhile, identified material acquisition
as a hotspot for two of its main models of mobile
phones, prompting it to introduce more sustainable
materials such as bio-plastics, bio-paints and recycled
metals and plastics. The company has set a target for
100% use of recycled materials by 2020 in its products
(see figure 12).

17. Materiality and business value
As we have seen, companies are at risk of misdirecting
sustainability investments. But techniques applied by
leaders in the field can help companies better prioritize
investments, and assess their likely effectiveness.
Companies which identify
all three types of climate risk
(physical, regulatory and other) are
6 times
For example, materiality matrixes, as used by Ford
Motor Company, can help identify critical issues for
sustainability investments (see figure 13). The carmaker
uses the matrix to plot issues in terms of their concern
to stakeholders, and their likely current or future impact
on the company. Supply chain sustainability and climate
change both fall into the top-right of the matrix.
more likely to make investments,
and three times more likely to
reduce emissions.
Meanwhile, investment decisions can be further refined
using frameworks to assess how likely they are to deliver
value against multiple dimensions. The RBCR approach
– which incorporates Revenues, Brand & Reputation,
Costs and Risk – helps to assess potential investments
in terms of the certainty or otherwise of their impact,
their ability to mitigate risk, and to deliver innovation
(see figure 14).
The lesson is clear: responding companies
are identifying climate risks with the potential to
have material financial impacts, often in a short
time-frame:
{ 69% of all instances identifying a potential impact from
regulatory risks identify increased operational costs as a
potential impact;
{ In 70% of instances where participants cite fuel/energy
taxes as a climate risk, they say the chance of this risk
driver impacting operations is likely, very likely or virtually
certain and, in 74% of instances, the impact will be felt in
the next five years;
{ 75% of those expecting changes in precipitation
extremes and droughts believe the impact will be felt in
the next five years and;
{ Of those instances listing ‘other’ climate change risks,
53% see reduced demand for goods and services as the
potential impact.
13. Materiality Matrix (used by Ford Motor Company)
Low Impact,
High Concern
High Impact,
High Concern
Medium Impact,
High Concern
Low Impact,
Medium Concern
Increasing concern to stakeholders
Risk management
The identification of climate risks is a key factor in
spurring investment in emissions reductions activities,
and in delivering year-on-year emissions reductions.
As shown by the chart, companies which identify all
three types of climate risk (physical, regulatory and other)
are six times more likely to make investments, and three
times more likely to reduce emissions.
Medium Impact,
Medium Concern
Low Impact,
Low Concern
High Impact,
Medium Concern
High Impact,
Low Concern
Medium Impact,
Low Concern
Increasing current or potential impact on Ford
14. RBCR Framework for sustainability value assessment
Revenues
{
{
{
{
New products and services
Pricing
Threats to existing markets
Business disruption
Brand & Reputation
Innovate
{
{
{
{
Goodwill
Investor relations
Employee engagement
Community involvment
Certain/short term
Costs
{
{
{
{
Less certain/long term
Risk
Energy efficiency
Investor relations
Employee engagement
Community involvement
Mitigate
{
{
{
{
New regulations
Company reporting
License to operate
Penalties/fines
17

18. L’Oréal’s supply chain membership evolution
L’Oreal 2020 Environmental Objectives: -60% Carbon -60% Water -60% Waste
“As supplier emissions are part of L’Oréal’s wider environmental footprint, we
are committed to working collaboratively with our strategic suppliers around
the world to succeed in reducing them. We encourage our suppliers
to measure, reduce and report their climate change and water-related
impacts and strategies through CDP. A factor of our success in driving
supplier performance and ambition in these areas is that it is no longer
solely our environmental experts who discuss these issues and areas for
improvement with suppliers; purchasers trained in this area have now also
become ambassadors.”
– Miguel Castellanos, Director of Global Safety, Health & Environment, L’Oréal
2008 2011 2012 2013
{
L’Oréal invites
suppliers to report
their GHG emissions
via CDP supply chain
questionnaire for the
first time
{
Long-term supplier
engagement
approach:
participation and
performance
improvement are key
{
L’Oréal’s
Environment, Health
& Safety department
and CDP supply
chain design and
create supplier
response profiles
{
to use’ tools
are made available for
buyers. They are not
expected to become
environmental experts,
but they are able
to have targeted
conversations with
suppliers about
their emissions
reporting, emissions
reduction targets and
specific collaborative
emissions reduction
proposals
{
Supplier disclosure
and performance
improves, highlighting
the valuable role
the procurement
function can play in
successful supplier
engagement
{
Following this
success, supplier
response profiles are
made available to all
supply chain Lead
members
{‘Ready
{
18
100 purchasers are
trained to be actively
involved in the CDP
supplier engagement
process
These buyer-supplier
conversations take
place during suppliers’
annual business
reviews. The response
profiles are used to
guide conversations,
highlight performance
achievements and
identify possible focus
areas for improvement
{ L’Oréal
becomes
a founding supply
chain water member,
adding water to their
supplier engagement
program. Supplier
water response
profiles created
{
L’Oréal becomes
a pilot Action
Exchange member,
to drive increased
supplier action
and performance
improvement

19. But it is crucial that the information gleaned from risk
reductions they generated. Over 400 initiatives
identification, emissions allocation, lifecycle analyses
were reported, leading to 2.3 million metric tonnes
and materiality matrixes is fed into the right processes.
of CO2e reductions.
Risk management is a vital component of a company’s
response to the sustainability challenge, and our analysis CDP’s work has generated plenty of supply chain
shows that leading companies are integrating climate
success stories:
change risk into business risk management processes.
Participants were asked if they have identified current
{ The Coca-Cola Company works with its bottlers
or future climate-related risks across three categories:
to identify financially beneficial emissions reduction
regulatory, physical, or ‘other’. More than three-quarters
initiatives. From 2004 to 2011, Coca-Cola achieved
(78%) of companies that had identified climate risks
close to USUS$900 million in savings, predominantly
across all three categories and provided details about
from energy efficiency investments.5
their risk management approaches integrate climate
risk into their company-wide, multi-disciplinary risk
{ Nike Inc.’s Manufacturing Energy & Carbon Program
management processes.
achieved a 6% absolute reduction in CO2e by contract
footwear manufacturers from 2008 to 2011, against a
Some companies in the vanguard have established
20% increase in production.6
specific climate risk management systems.
{ PepsiCo’s Tropicana brand worked with farmers to
{ BASF in 2008 created the position of Climate Protection develop carbon-neutral fertilizers using orange rinds
Officer, leading the Management Team for Climate
that are byproduct of orange juice processing.7
Protection, with responsibility for integrating climaterelated issues into strategy at the business unit and
{ Walmart asked MeadWestvaco Corp. (MWV) to develop
corporate levels.
a more environmentally efficient package for its retail
pharmaceutical adherence business. MWV designed a
{ British Sky Broadcasting has been running a specific
new paperboard-based packaging system (ShellPak®
climate change risk management process since 2009,
Renew) to replace a larger, heavier plastic-based
with each business unit required to submit risks annually packaging system. The new package is about 70% to
to the group’s risk register.
80% more greenhouse gas efficient to produce and will
also reduce transportation costs and emissions.
Worryingly, however, 38% of suppliers reported no
MWV’s key retail customers will realize greenhouse gas
documented processes for assessing and managing
emission savings from this change in packaging of more
climate-related risks. It is vital that major companies
than 12,000 metric tonnes annually.
press their suppliers to improve their climate risk
management strategies – their shortcomings are
As one of Walmart’s suppliers, plant supplier Olson’s
exposing their customers to unmanaged climate risk.
Greenhouse, puts it: “Walmart has driven our efforts to
Moreover, CDP data shows that emissions performance
become sustainable and has made us aware of many
improves as the number of identified risks grows. All
areas where we can make a difference. Walmart’s
companies need a comprehensive risk management
interests in reducing their own carbon footprint has
approach to help mitigate regulatory and physical
pushed our company to consider all initiatives in order
climate-related exposures.
to be a more responsible supplier.”
Collaboration along the supply chain
Collaboration is at the very heart of supply chain
sustainability. It is only by working with supply chain
partners that companies can drive reductions in the
environmental and social impacts that lie outside
their direct operations, and address supply chain
vulnerabilities that can have crippling impacts on
their profitability and reputation. Suppliers listen
to their customers; collaboration can encourage
suppliers to identify and realize sustainability
opportunities that can add monetary value as well
as deliver environmental benefits.
It is clear that collaboration yields results but there is
huge untapped potential for emissions reductions from
supply chain collaboration. For the first time, CDP asked
suppliers to report on the number of emissions reduction
projects they had implemented following engagement
of supply chain members, and the volume of emissions
This is just scratching the surface. Participants identify
2,186 collaborative opportunities that have been
suggested but not yet implemented, (recommended
by 1068 supplier companies). The persistent gap in
performance between supply chain member companies
and their suppliers suggests that there remains a void in
knowledge and incentives.
This begs the question: How best can companies
work with their suppliers to drive sustainability in the
supply chain?
5. The 3% Solution: Driving Profits Through Carbon Reductions - a report
by CDP and WWF
6. The 3% Solution: Driving Profits Through Carbon Reductions - a report
by CDP and WWF
7. The 3% Solution: Driving Profits Through Carbon Reductions - a report
by CDP and WWF
19

20. We are having forward-thinking
sustainability and GHG managementrelated conversations with nearly all of
our customers. CDP is really helping;
it is pushing these conversations
forward. CDP also allows these
conversations to take place through
our written response, which can be
shared with other stakeholders –
ultimately leading to the reduction of
GHG emissions.
major US recycling company
Waste Management Inc.
Collaboration works
Collaboration is a strong driver of increased
performance. This is particularly the case with the
number of requests suppliers receive. More than half
(55%) of suppliers who receive more than three requests
to participate in CDP’s supply chain program report
making emissions reductions, compared with just 26%
of those who receive just one request from a customer
(see figure 15).
Collaborating with suppliers and consumers helps
drive corporate emissions reductions and, particularly,
monetary savings from climate change mitigation. Those
companies that engage with two or more suppliers,
consumers or other partners are more than twice as
likely to see a financial return from their emissions
reductions investments, and almost twice as likely to
reduce emissions (see figure 16) than those who don’t
engage with their value chain. For example, Cisco has
achieved a 41% reduction in its GHG emissions against
a 2007 baseline – a result built upon working with supply
chain partners to build their capabilities, and working
with industry consortia to develop common reporting
and auditing tools.
15. Suppliers who receive more customer requests are more likely to report climate action
Performance comparison of suppliers according to the number of invites received
Number
of invites
% reporting
emissions
reductions
% reporting
monetary savings
% reporting
investments
% reporting board level
responsibility for climate change
% reporting integrating climate
change into business strategy
N Value
>3
55%
64%
62%
73%
94%
265
3
52%
54%
51%
67%
87%
162
2
40%
37%
37%
59%
77%
397
1
26%
26%
24%
41%
64%
2044
16. Suppliers who engage with more stakeholders in their value chain have higher emission
reduction performance
N=147
67%
N=312
67%
51%
54%
60%
N=551
N=798
63%
45%
48%
49%
29%
Consumers, suppliers &
other partners in value chain
{
{
{
20
Any 2 stakeholders in of the
value chain
Any 1 stakeholders in of the
value chain
% of respondents reporting year-on-year decrease in emissions
% of respondents reporting investments in climate change mitigation
% of respondents reporting monetary savings from climate change mitigation activities
23%
Not engaging with
value chain
25%

21. As US recycling major Waste Management Inc. puts
{ Finding common ground
it: “We are having forward-thinking sustainability
One of the findings this year is a disconnect between
and GHG management-related conversations with
the types of collaboration recommended by suppliers
nearly all of our customers. CDP is really helping; it is
as most effective, and the types of collaboration
pushing these conversations forward. CDP also allows
pursued by member companies. Suppliers recommend
these conversations to take place through our written
process emissions reductions (18% of total instances
response, which can be shared with other stakeholders
of collaboration mechanisms reported) and product
– ultimately leading to the reduction of GHG emissions.”
design (15%) as the most promising collaborative
approaches. However, the most favored investments
Participation in CDP’s supply chain program is a vital
made by member companies are behavioral change
first step – and is driving supplier engagement on
initiatives (40%) and transportation and fleet investments
sustainability and climate change issues, that is not
(27%). Suppliers favor investments in energy efficiency
happening at all within the vast majority of multinationals.
processes (42%) and energy efficiency in building
But member companies need to do more. High
services (cited by 33% of responding suppliers).
levels of performance among the 64 supply chain
members do not necessarily influence suppliers, who
There is clearly room for closer collaboration between
are understandably most concerned with their own
member companies and their suppliers. To address
performance. Indeed, the data shows that suppliers to
this opportunity CDP has launched its Action Exchange
the climate change leaders (whose performance score is
initiative (AEX) (see box below).
higher than average performance score) cohort slightly
underperform those supplying to the laggards.
This result seems counter-intuitive. We can speculate
that leaders have perhaps focused on their own
performance to the detriment of their supply chain. But
this presents a challenge to member company leaders:
if they fail to improve the performance of their supply
chains then, at best, their designation as leaders will
become little more than notional. At worst, they will be
exposing themselves to unmanaged climate risks in their
supply chains
So how might companies seek to motivate
their suppliers?
{ Preferential treatment
First, buyers can directly incentivize sustainability
performance by, for example, giving preferential
treatment to suppliers who deliver on a particular
sustainability metric. Vodafone Group Plc, for instance,
bases the share of the business it gives to approved
suppliers upon a sustainability scorecard they are
required to fill out.
{ Rethinking risk management
Buyers can also work with their suppliers on improving
the latter’s risk management, to the benefit of both
parties. 94% of member companies integrate climate
issues into company-wide risk management processes,
compared with 51% of suppliers. It is in customers’
interests to ensure that their suppliers have a handle on
risks that could lead to business interruption.
Launching CDP Action Exchange
CDP’s supply chain newly-launched Action
Exchange program is designed to equip companies
with the intelligence and solutions that will help
them take action to reduce greenhouse gas
emissions and realize financial savings. Six founding
CDP supply chain member companies – Bank of
America, L’Oreal, PepsiCo, Philips, Vodafone and
Walmart – have invited key suppliers to participate.
These suppliers will benefit from in-depth analysis,
using CDP response data and company-specific
information, to identify the most relevant, cost
efficient emissions reduction opportunities open to
them.
The Institute for Industrial Productivity and
the University of Minnesota’s Institute on the
Environment will conduct the analysis in partnership
with CDP. Action Exchange will also identify and
select technology, service and finance providers to
undertake the projects identified by the analysis.
While participation in the initiative will come at
no cost to suppliers, they will be required to give
serious consideration to the opportunities presented
through Action Exchange.
Action Exchange addresses some of the barriers
that prevent companies seizing low- or no-cost
emissions reductions opportunities – the lack
of management focus, questions over payback
periods, and lack of access to finance – with the
goal of closing the performance gap between CDP’s
supply chain members and their suppliers.
This first phase of Action Exchange has been made
possible by the generous support of ClimateWorks
Foundation and Energy Foundation.
21

22. Action Exchange: helping to put energy
efficiency at the heart of business
The Institute for Industrial Productivity (IIP) works to mitigate climate
change by helping industry cut its energy use. Working with CDP on the
Action Exchange project will support the growing movement towards
smarter, cleaner manufacturing.
Living in a modern world, it’s clear that everything we do
depends on energy. Every waking moment underlines
our utter dependence – from switching on the light or
heating, to using our computers and smartphones, to
using transport to and from work. What we don’t often
consider is the energy used in the production of every
item we come into contact with during our day.
Industry is responsible for around a third of the world’s
total energy use – more than any other sector of
the economy. With growing concerns about climate
change, it’s clear that the way industry uses energy will
need to change. To do this, the market will need to be
transformed, new technologies will have to be created,
and the price of carbon will need to be considered in
everything we produce.
The Action Exchange project will contribute to this
important task by enabling multinational corporations
to become a beacon for positive change, rather than
a symbol of consumption. It will do this by helping
companies reduce greenhouse gas emissions
throughout their supply chains, which reach into every
sector and every corner of the world.
The value of using supply chains to drive change
cannot be underestimated. Around 40 to 60% of a
manufacturing company’s carbon footprint comes from
its supply chain, but this number can be as high as 80%.
IIP will work with participating firms to help them
improve their energy efficiency practices, and those of
their suppliers. The companies that are part of these
supply chains can expect to improve their profitability,
productivity and competitiveness in the process.
22
These aren’t the only benefits. Multiplied on a larger
scale, energy efficient practices could bring a host of
other benefits to human health and the environment,
generate jobs and drive economic growth. It could also
trigger a major shift away from outdated electric utility
business models and usher in a new era of smart power.
It’s because of these positive outcomes that many
companies and governments are turning to energy
efficiency to help them meet their business and policy
objectives. Energy management, in particular, has been
the focus of both policymakers and industry leaders over
the last few years, and many major companies now also
consider the price of carbon as a core element of their
business strategy.
While these efforts will go some way towards reducing
growing emissions – it’s not yet enough. The aspiration
to be carbon neutral must be at the heart of all business
strategies if we are to cut emissions enough to make a
real difference. It is our hope that the Action Exchange
project will be part of the wave of new policies,
programs and products that will drive this change.
Established in 2010, IIP is an independent non-profit
organization whose role is to accelerate the uptake of
energy efficiency practices amongst industry. It is the
only global organization solely dedicated to helping
reduce industrial energy use to mitigate climate change
and address other relevant environmental issues. IIP
has a global team and network of independent experts
that provide advice on technology, policy and financing
of industrial energy efficiency. It also works at national
and local levels to improve energy efficiency policies,
practices and technology adoption. www.iipnetwork.org

23. Action Exchange - Going beyond low hanging fruits
Getting beyond the question of why companies might invest in carbon
reduction activities, many companies are focusing on how to accomplish
them – and, discovering that “low hanging fruit” may not produce the
“biggest bang for the buck”.
Expectedly, over half of the 5,000 emissions reductions
activities reported to CDP’s 2013 Supply Chain Survey
fall within the “low hanging fruit” category of energy
efficiency. Process improvements (e.g. heat recovery,
wastewater treatment) are the most common energy
efficiency projects, with building services (e.g. HVAC,
lighting) a close second. However, if history serves as
a guide, it is safe to say that these reported investments
only scratch the surface of potential energy or cost
savings. In short, many are investing in easy-toimplement projects with quick hitting, though
modest, carbon reductions. Though not insignificant,
these efforts, alone, may not be able to meet the
carbon reduction targets of an increasing number of
companies; nor do they meet the growing expectations
of key customers.
Seventy percent of CDP reporting companies indicate
that they manage some form of target for carbon
emissions reductions. Unlike the pursuit of “low hanging”
projects, achieving a specified emissions reduction
target necessitates a much greater focus on identifying
the most efficient strategies in meeting that goal. The
rules of the sustainability game are shifting from justifying
the expense of doing anything, to strategically innovating
in order to meet specific reductions, often driven by
customers. Better understanding this shift across
supply chains, through enhanced analysis of CDP’s
data resources, is at the heart of recent collaborations
between CDP and the University of Minnesota’s
NorthStar Initiative for Sustainable Enterprise (NiSE).
lighting efficiency projects require significantly less
initial investment, but generate 1/100 of the carbon
emissions reductions of product design and 1/166
of the reductions of process emissions reductions.
When managing a reduction target, not all projects will
generate enough emissions reductions to be worth
pursuing – nor will all targeted reductions necessarily be
financially net-positive.
For some companies, especially small and medium
enterprises hindered by a lack of capital or access
to financing, low initial investment costs are key to
implementation. For these, energy efficiency projects
in building services and processes are the two areas
with the best carbon savings per initial investment
dollar. However, the biggest-hitting carbon reduction
opportunities identified by CDP respondents are found in
product design, low carbon energy purchases, behavior
change and process emissions reductions.
When large customers ask suppliers, “how are you
reducing carbon emissions?” the response, “we aren’t”
is not an option. Increasingly, the response, “we do
a few of the easy things” may also be falling short
of customer expectations. The analytics provided
to suppliers participating in AEX is benchmarking
performance relative to peers and identifying
opportunities to demonstrate meaningful and efficient
carbon reductions to the supply chain – helping firms
find the lowest-hanging, biggest-hitting emissions
reduction strategies.
Analysis supporting CDP’s new Action Exchange (AEX)
initiative indicates that, across all sectors, product
design changes yield the largest annual savings
per tonne of CO2e saved, significantly greater than
any other emissions reductions category. However,
these strategies also come with the highest reported
initial investment requirements. In contrast, many
23

24. Motivating staff, suppliers and customers
Collaboration is only one part of the story. Companies
– whether suppliers or customers – need to build their
internal capacity to identify climate change risks and
opportunities. They need to ensure that emissions
reductions initiatives they pursue, whether internal or in
partnership, are successful. They need to motivate their
employees to deliver on their objectives.
Getting governance right
How climate change is addressed by company
governance structures is critical to determining
how successful companies are in managing the
issue, according to participants in CDP’s supply
chain program.
The findings are unequivocal: companies that integrate
climate change into business strategy perform better
than those that don’t. Of those companies that do
so, at least four in ten have reduced emissions, made
investments in emissions reductions, or saw monetary
savings from those investments. Of those that don’t,
the figures are one in six, one in ten, and one in
ten, respectively.
Similarly, the higher the level of responsibility for
the climate change issue, the better the performance
achieved. Board-level responsibility generates between
three and six times the level of performance of
companies with no individual or committee with
overall responsibility.
The analysis also shows that performance is enhanced
by engaging a higher number of corporate functions in
the supply chain effort: cross-functional engagement
drives sustainability. That is, if legal, procurement,
and logistics are engaged as well as the sustainability
or corporate social responsibility department, the
sustainability initiative is likely to stick. Unilever, for
example, trains all its managers in its supply chain
to ensure they understand the consumer goods
multinational’s sustainability targets, with training
provided at all levels of the procurement process. L’Oréal
has trained its procurement teams to discuss CDP data
with its suppliers, including issues such as reduction
targets in annual business reviews.
Participant responses show that companies which
involved more than four business functions in supply
chain sustainability were almost twice as likely to
generate monetary savings compared with companies
involving fewer than four. They are also almost twice as
likely to deliver annual emissions reductions (64% to
36%) and four times more likely to generate monetary
savings (81% to 19%) (see figure 17).
Engaging employees
Companies that invest in formal employee engagement
and provide appropriate employee incentives perform
better in terms of delivering reductions and reaping
monetary benefits. As figure 18 shows, 63% of
companies with employee engagement programs
realized monetary benefits from emissions reductions
projects, compared with 52% of those without. The gulf
17. Performance comparison of members
81%
N=28
N=37
64%
N=37
36%
24%
19%
Year-on-year decrease in
carbon emissions
Monetary savings from
emissions reductions initiatives
Less than 4 functions
primarily responsible for
(or) involved in supply chain
sustainability
{ More than 4 functions
primarily responsible for
(or) involved in supply chain
sustainability
{
76%
Investment in emissions
reductions initiatives
18. Emissions reductions performance of companies based on employee engagement/internal
incentive status
63%
52%
45%
% reporting emissions
reductions
{
{
24
52%
% reporting
monetary savings
Adopting employee engagement, N=554
Not adopting employee engagement N=878
74%
59%
51%
% reporting
investments
55%
46%
% reporting emissions
reductions
{
{
69%
53%
% reporting
monetary savings
51%
% reporting
investments
Having internal incentives/recognition programs N=246
Not having internal incentives/recognition programs N=1186

25. was even wider with incentive programs: nearly threequarters of companies with such initiatives reported
monetary benefits, compared with a little over half of
those without.
Such programs might include specific emissionsrelated KPIs as a formal part of employee
remuneration packages. Examples from CDP
reporting include:
{ Diageo Plc’s performance indicator incentivized for
business unit managers is focused on progress
against its target to reduce carbon emissions by 50%
by 2015. The annual business objectives for business
unit managers include an annual target for carbon
reduction for the manager’s region of responsibility.
Achieving this annual carbon target results in a higher
bonus payout for the individual.
{ BMW’s management bonus payments are directly
linked to the fulfillment of the German carmaker’s
corporate and divisional climate change targets.
{ The 5,000 top managers of French bank BNP Paribas
participate in its International Sustainability Incentive
Scheme, which is indexed to nine CSR targets,
including reduction of energy consumption from
premises and reduced business travel.
However, such programs appear to be a relatively
low priority for companies, despite the performance
benefits they bring. In most sectors, fewer than
one in ten companies have incentive programs, the
exceptions being financials (one in five) utilities (one
in seven) and healthcare (one in eight). Employee
engagement programs are more widespread, but even
here, typically at least three quarters of companies do
not have them in place (financials are an exception).
Supporting suppliers
As we have seen, member companies have not paid
sufficient attention to supporting their suppliers in
improving sustainability performance – leaving risks
unaddressed and opportunities unexploited. However,
we have found numerous examples of best practice
among supply chain program members:
{ A major financial institution and member of CDP’s
supply chain program runs a program offering grants
to key suppliers to measure their environmental
footprint, as well as private coaching and help
setting goals.
{ Through its Sustainable Agriculture Code, Unilever asks
suppliers, and the farmers who supply them, to adopt
sustainable practices on their farms. Unilever expects
all suppliers of agricultural raw materials to commit to
joining the sustainability journey and to demonstrate that
they agree to minimum standards of performance and to
improve performance continuously over time.
{ Acer has asked its key suppliers to set up intensity
reduction target from 1 to 5 % per unit every year
since 2011.
In addition, CDP provides training and support to both
CDP supply chain member companies and their direct
suppliers. CDP runs workshops all over the world, and a
series of online webinars, tailored exclusively to suppliers.
Regional events have been particularly beneficial; for
the last two years, CDP supply chain has worked
with the Chinese government and the UK Foreign &
Commonwealth Office on climate change. By
providing translated guidance, carbon foot-printing
tools and capacity building webinars to Chinese
suppliers, the program has encouraged more than 100
Chinese suppliers to disclose their emissions via CDP’s
reporting platform.
CDP’s unique insight has provided critical support
for the Ministry of Finance in China’s work on green
procurement over the last year. We look forward to
continuing working with CDP on this important issue
to catalyze more sustainable government and business
practice. We wish CDP a successful future in China.
Zhai Gang, Director General,
Treasury Department, Ministry
of Finance, Government of the
People’s Republic of China
25

26. The case for communication
Transparency and communication around efforts to
reduce emissions is another driver of performance,
according to our analysis.
{ Third party assurance: CDP has long encouraged
that companies seek third party assurance of their
emissions reporting. By providing an external stamp,
such assurance adds to the credibility of reporting, and
can help companies identify oversights and, potentially,
{ Public reporting: Commitments to report publicly
opportunities to enhance their emissions reduction
on emissions reductions provide a strong incentive
efforts. The data also shows that companies which
and motivator to employees and management alike to
pursue third-party assurance report higher levels of
seek out reduction opportunities and deliver positive
reductions, monetary savings and investments
outcomes. The data shows steady performance
(see figure 20). We believe third-party assurance
improvement among ‘regular communicators’ – that is,
helps companies identify environmental and cost
companies who have reported through CDP each year
savings, therefore triggering additional investment –
since 2011 (see figure 19).
a virtuous circle.
{ The importance of moving beyond compliance:
There has been a steady increase in the number of
companies choosing to go beyond regulatory and
annual CSR reporting of emissions data. This year, 356
participants elected to report their emissions purely
through voluntary platforms, up from 182 in 2011. Such
activity is linked to higher levels of performance, with
51% of such companies reporting emissions reductions,
compared with just 30% who only report in line with
regulatory requirements. Such voluntary reporting
helps build credibility among stakeholders in terms of
their climate change commitments, and provides an
additional internal motivation to deliver reductions.
And there are brand and business advantages for
suppliers from involvement in CDP’s supply chain
program. “We are making sure we address the
environmental impacts of our business. By disclosing
this through our CDP response, we are letting our
customers know that we are actively investing in the
sustainability of our business and the energy efficiency
of our products which gives us a strategic competitive
advantage to win their business,” says Cavium Inc,
a California-based semiconductor company.
19. Performance of regular communicators (CDP disclosers) from 2011 through 2013
N=628
53%
50%
39%
44%
46%
45%
39%
50%
{
{
{
29%
% of companies that
invested (Regular
communicators since 2011)
% of companies that reported
monetary savings (Regular
communicators since 2011)
2011
2012
2013
% of companies that reported
emissions reductions (Regular
communicators since 2011)
20. Performance comparison of companies with and without third party assurance of
emissions reductions
77%
N=262
75%
57%
53%
45%
39%
% of companies reporting
emissions reductions
26
% of companies reporting
monetary savings
Companies with third party
assurance done for at least
one of Scope 1, Scope 2 or
Scope 3
{ Companies with no third party
assurance for Scope 1, Scope
2 or Scope 3
{
N=428
% of companies reporting
investments

27. The Need For A Wider View Of Supply Chain
Sustainability
There is more than one lever by which a company can exert downward
pressure on its emissions. Carbon and climate risks are linked to other
sustainability issues, such as water use and resource efficiency. A focus on a
company’s broader commodity inputs and the water-energy-carbon nexus can
help to reduce emissions and generate monetary savings.
Investing in resource efficiency
A growing and increasingly affluent population is
putting ever greater demands on global resources,
leading to rising and increasingly volatile prices across
a whole range of commodity markets. Companies in
the program are not asked directly about resource
efficiency, but the program does reveal a significant
increase in the number of projects that reduce fossil
fuel consumption, particularly via investment in
renewable energy.
Nearly half (302) of the 676 climate change mitigation
projects reported in 2013 were in renewable energy. The
number of carbon credits originated and purchased by
responding companies in 2013 is also up by 66% to
161 million metric tonnes of CO2e.
No water means no business. Companies are becoming
more aware that not having adequate access to
the quality and quantity of water required can mean
operations are suspended or even closed, in some
cases causing severe loss of revenue. Among physical
risks, 52% of instances highlighted water stress or
scarcity as the biggest concern. Among these, for water
risk instances which indicated a timeframe for impact
on operations, almost 72% of instances expected an
impact from water within the next 5 years. Almost one
third of instances reporting regulatory risks related to
water (31%) were concerned about higher prices for
water, while a quarter cited concerns about higher
compliance costs around water discharges. Among
other risks, more than one third raised reputational
issues as a major concern (see figure 21).
As the cost of renewable energy falls towards and
below grid parity, companies are increasingly seeing
the benefit of energy sources that do not rely upon
rising and volatile fossil fuel markets – and which
simultaneously offer a climate benefit.
Reducing inputs across the range of commodities, aside
from energy inputs, makes good business sense, as
well as generating environmental benefits. Raw material
inputs tend to come with large emissions attached.
Any progress away from the 20th century model of
‘take, make, dispose’, towards the principles of
the circular economy, will bring benefits in terms of
companies’ total emissions.
The water-energy-carbon nexus
A growing number of companies are likely to face
growing water risk irrespective of climate change, as
competition for the resource grows. But addressing
water risk can also deliver benefits in terms of emissions
reductions. Managing water risk can secure a social
license to operate, enhance brand value and help
ensure business growth. As CDP has identified through
its highly successful water program, water stress and
scarcity, regulatory issues, or reputational damage
from pollution can pose more immediate risks to some
companies than are posed by climate change.
21. Top Water Risk Drivers percentage of responses
52%
Physical risks, N=105
{
29%
13%
Increased
water stress
or scarcity
Flooding
{
Declining
water quality
6%
Other
Regulatory risks, N=90
31%
24%
19%
8%
Higher water
prices
36%
Regulation of
discharge quality/
volumes leading to
higher compliance
costs
{
Statutory water
withdrawal limits/
changes to water
allocation
Other risks, N=22
14%
Reputational
damage
Mandatory
water efficiency,
conservation,
recycling
or process
standards
Inadequate
infrastructure
9%
Product risk
9%
Availability of
raw materials
27

28. These risks create an urgent need for companies
to take action to address corporate water issues. In
addition, 26% of participants also identified linkages
between water and carbon emissions in their
operations or supply chains. For example:
{ ITC Limited has increased levels of water recycling at
its paper manufacturing unit, significantly reducing the
amount of energy the Indian conglomerate hitherto
used to pump freshwater from a river some miles away.
{ Through an innovative wastewater recycling program,
Dow Chemical’s Terneuzen manufacturing facility
accepts 10,000 cubic meters of municipal household
wastewater each day from the city, has it purified by
water company Evides, and uses it to generate steam
and feed its manufacturing plants. The program has
reduced Dow Terneuzen’s energy use by 95 percent,
the equivalent of reducing CO2 emissions by 60,000
tonnes each year.
Supply chain collaboration is also crucial: for many
companies, the majority of their water risk is to be
found in their supply chains, from agricultural or other
commodity inputs, for example. ITC Limited has
identified the reduced availability of its agricultural
raw materials as a key water risk. In response, it
has undertaken a community-based watershed
development program to address land degradation,
extend irrigation and raise agricultural productivity.
53%
companies disclosing
information on water risks
have water-related targets,
highlighting the fact that
companies are recognizing
water risks but are not enough
companies are taking action to
mitigate them
28
Companies must also be mindful of the ideal scale
at which to address water risks. Unlike carbon
emissions, which have an identical climate impact
wherever they are generated, water risks are highly
localized. While two-thirds of pulp and paper companies
identified water risk as most acute at the facility level,
69% of food products companies considered water risk
to manifest itself at the regional or country level. These
latter risks require collaboration with other regional or
national stakeholders.
However, preparedness lags, even among companies
acknowledging the risks that water can pose:
{ Only 53% companies disclosing information on water
risks have water-related targets, highlighting the fact that
companies are recognizing water risks but not enough
companies are taking action to mitigate them;
{ Only 46% of companies report data on water recycling
within their operations;
{ Only 35% of companies report having board-level
responsibility for water conservation; and
{ Only 18% of companies require their key suppliers to
report on their water use, risks and management.
We would recommend that for both suppliers and
supply chain members to take the lead in water
stewardship, they need to:
{ Identify where they are most exposed to water risk
throughout their operations in order to prioritize action;
{ Recognize that water is a shared resource and therefore
requires a shared response. Collaboration with key
stakeholders at the local water shed level is key;
{ Look beyond their direct operations and take action
across their value chain; and.
{ Set targets that include action not just on water
conservation, but also on policy, community and supply
chain engagement, and transparency.

29. The Importance Of Engaging In The Policy Process
As we have seen, the political environment in which companies operate is
having a profound – and currently negative – influence on the commitments
companies are making to tackling climate and wider sustainability issues.
These are necessarily long-term challenges, and companies can only go so far
in the absence of regulatory certainty.
There is a clear case for greater levels of engagement
by companies in the policy process – and this year’s
analysis shows where companies are engaging, and
what measures they support. This can give pointers to
the direction of regulatory development.
Of the 543 companies that report engaging with
policymakers, 51% engage on energy efficiency, 27%
on mandatory carbon reporting, 22% on clean energy
generation, and 20% on cap-and-trade. Support is
strongest for policies promoting energy efficiency and
clean energy generation, both backed unequivocally by
81% of instances reported by participants. Mandatory
carbon reporting is supported by 67%, while cap-andtrade programs receive the unqualified support of just
43%, although a further 33% of instances support them
with ‘minor exceptions’ (see figure 22).
81+14+21t 67+19+1121t
81+12+51t 43+33+1095t
22. Strong majority of suppliers report support of policy initiatives
Energy efficiency, N=315
Mandatory carbon reporting, N=160
2% 1%
2%
1%
11%
14%
2%
19%
67%
81%
Clean energy generation, N=141
{
{
{
{
{
{
Neutral
Oppose
Support
Support with
major exceptions
Support with
minor exceptions
Undecided
Cap and trade, N=110
1%
5% 1%
5%
9%
12%
10%
43%
81%
33%
N values (total number of
responses to this question in
CDP survey) are specified on
top of the pie chart
29

30. Conclusion
Support for cap-and-trade may be lukewarm.
Commitments to invest are positively frigid. Fully 77%
of participants said they neither participate in carbon
markets, nor plan to do so in the next two years. This
shows the chilling effect regulatory uncertainty can have
on investment.
But one of the most striking findings from this year’s
analysis is the strong relationship between engagement
with policymakers on climate–related issues, and their
performance in emissions reduction terms. Across the
three main performance metrics, half or almost half of
participants that are engaging policymakers compare
positively. The figures for those not engaging range from
26% (reporting decreased emissions) to 17% (making
investments in emissions reductions). Fully 50% of those
engaging policymakers reported making monetary
savings from their reduction projects, compared with
just 18% among those that do not (see figure 23).
Engagement with policy makers can be critical in
ensuring that business interests are represented in the
policy process, and can provide invaluable insights to
inform corporate actions and investments.
23. Performance comparison of companies that
engage and do not engage policymakers
N=1323
50%
48%
45%
N=756
26%
18%
Decrease in carbon
emissions
{
30
Monetary savings
Companies that engage
policymakers
{
17%
Investments in
emissions reductions
Companies that don’t
engage policymakers
As far as climate change and wider supply chain
sustainability is concerned, companies are operating
in an extremely challenging environment. Even as
they recognize that climate and water risks are rising,
mixed regulatory signals make decisive action difficult.
Investment is plateauing. Risks are going unmanaged,
and opportunities to reduce emissions and generate
monetary value are going ungrasped.
But rising participation in CDP’s supply chain program
shows that companies are laying the groundwork for
action; they understand that there are opportunities
to leverage their relationships with their customers
and suppliers to the benefit of all parties. By better
understanding where emissions reductions investments
can most profitably be made, collaborating along
the value chain, and motivating stakeholders to
perform better, they can simultaneously reduce their
environmental impacts and generate economic value.

31. SCPLI – Supplier Climate Performance Leadership Index
Each year, supplier responses to CDP’s climate change information request
are analyzed and scored against two parallel scoring methodologies:
disclosure and performance. This year, for the first time, we are publishing a
list of the suppliers that are leading on performance.
The performance score assesses the level of action,
as reported by the company on climate change
mitigation, adaptation and transparency. Its intent is
to highlight positive climate action as demonstrated
by a company’s CDP response. A high performance
score signals that a company is measuring, verifying
and managing its carbon footprint, for example by
setting and meeting carbon reduction targets and
implementing programs to reduce emissions in both
its direct operations and supply chain.
Many members use supplier scores in their assessments
of suppliers. The CDP scoring methodology is the
highest rated sustainability rating system.
31

32. FirstCarbon Solutions Perspective:
In 2013, companies responding to the CDP Supply Chain program improved
for both disclosure and performance, but most notably in performance. Overall
the program average performance score rose substantially, from an average
of 36 in 2012, to an average of 45 in 2013, or 28%. Scoring improved across
all performance categories, lead by a 45% increase in the strategy category
suggesting a stronger emphasis in how supply chain companies are planning
and implementing emissions reductions initiatives across the enterprise. Three
companies scored 100 in both disclosure and A for performance and another
eleven scored 100 for disclosure and 85+ for Performance.
What defines leadership in the supply
chain program?
It’s FCS’ experience in scoring over 7000 CDP
disclosures since 2011 that companies at the front of
climate leadership demonstrate a holistic approach
to climate change management and fully integrate
risk mitigation into their strategic planning. SCPLI
companies provide transparency to their climate
reduction efforts and achieve significant of emissions
reductions through these mitigation initiatives. While
80 companies are listed with a performance band of
A or A- for all supply chain responders for the 2013
reporting year, a number of companies are on the
verge of this level of leadership. The following areas
most distinguish leaders from the highest scoring
non-leadership companies:
{ Establishing board-level oversight on climate planning
along with monetary incentives for emissions
reductions
{ Providing substantive detail on how climate change
is integrated into risk management and corporate
strategy planning
{ Setting Scope 1 and Scope 2 reduction targets
{ Disclosing evidence of Scope 1 & Scope 2 emissions
reductions activities that delivered significant results
{ Providing independent 3rd party assurance of Scope
1, Scope 2 and Scope 3 emissions
In 2013, 4% of companies that submitted a full
supply chain questionnaire and 2% of companies
that submitted the SME questionnaire achieved an
A or A- performance band.
A
32
An additional 2% of responding companies would have reached an A or A- band had
they achieved deeper emissions reductions in the reporting year due to emissions
reductions initiatives.
A further 2% of responding companies would have received an A or A- for performance
if they demonstrated additional strength in one or more of the following areas: providing
financial incentives, risk management procedures, additional detail on how climate
changed was integrated into business strategies or details surrounding intensity targets.

33. 2013 supply chain performance category band comparison
91
Governance
60
62
Strategy
58
61
94
92
42
Emissions Performance
45
95
32
Verification / Stakeholder Engagement
36
E
{
Leader average
D C
{
Non-Leader average
B A
{
Overall supply chain average
2013 supply chain disclosure category score comparison
98
Governance & Strategy
74
74
93
Risk
36
38
87
31
33
Opportunities
98
Emissions Management
55
57
97
63
64
Emissions Reporting
98
36
38
Verification / Stakeholders
0 20 40 60 80
100
{
Leader average
{
Non-Leader average
{
Overall supply chain average
2013 SME disclosure category score comparison
Strategy, Risk and Opportunities
69
36
37
92
45
47
0 20 40 60 80
100
Emissions Reporting and Management
{
Leader average
{
Non-Leader average
{
Overall supply chain average
33